ALEX BRUMMER: Trouncing of Pfizer makes case for City referee’s role even stronger

Pfizer has called off its dogs of war for the time being and is licking its wounds, having failed to woo AstraZeneca.

In beating the retreat the company has been far from noble. Instead of accepting that the campaign was flawed, Pfizer left the field of battle accusing the City of being bureaucratic.

The sub-plot is that somehow the post-Cadbury shortened takeover timetable works to the bidder’s disadvantage.

Keeping marauders at bay: The combination of a robust Swedish chairman in Leif Johannson and a French chief executive, in Pascal Soriot, were up for the fight

Some myths about this revised narrative need to be cleared up.

The idea that Pfizer only had 28-days to pursue its prey is fanciful. The first approach to the AstraZeneca board came in November of 2013 so effectively the pursuit went on for almost six months.

The Panel’s clock was only turned on after a leak to a Sunday newspaper. By then Ian Read, Pfizer’s Scottish-American boss, was in full flow and looked to have done a brilliant job of softening up Whitehall – in the shape of Sir Jeremy Heywood and ministers including George Osborne and David Willetts – on the wonders of a Pfizer-AZ combination. Trade Secretary Vince Cable wobbled until Ed Miliband, briefed by AZ board member Shriti Vadera (a former Labour minister), rightly demanded a public interest test.

Read clearly thought that if he could bounce the Government into supporting the transaction, the AZ board would fall into line.

The combination of a robust Swedish chairman in Leif Johannson and a French chief executive, in Pascal Soriot, were up for the fight.

Smartly, Soriot had spent some time with the financial media briefing extensively on the progress being made at AZ before public disclosure of the approaches.

He underlined his belief in British science and a proposed Cambridge investment, but also has given an important flavour of the way AZ’s immunology knowledge was going to be the next big breakthrough in cancer treatment. Read, the Pfizer board and advisers made some critical errors.

The attempt to butter up the Government backfired when the issue came up at Question Time in the Commons and at select committee hearings.

Read was seen as trying to bulldoze the public debate on tax grounds, where US companies operating in Britain – Starbucks and Google to mention two – do not have a wonderful record.

Pfizer also made a mistake in deploying the word ‘final’ offer too early, locking the company into a deadline and a combination of cash and shares that investors did not find that attractive.

The 28-day rule, drawn up after the Kraft siege of Cadbury, was designed to do two things.

The rule aimed at stopping a company from coming under siege, when it is hard to execute business-as-usual, as well as shortening the period of time in which hedge funds have to dominate the share register and fix the outcome.

Read wanted to have things both ways. He disliked the takeover timetable but embraced the idea that a five-year promise on jobs and research, made in the heat of the bid, could be enforced by the Panel through the courts.

If anything the trouncing of Pfizer makes the case for the City referee’s role even stronger, and we saw that again this week when another would-be US assassin, Stryker, backed off a bid for Smith & Nephew after a sharp upward price movement.

Put-up or shut-up is an important principle. The Takeover Panel did a good job. But that does not make the case for even more, economic and science-based scrutiny of takeovers any weaker.

When the Government returns from recess ministers should make the time to broaden the public interest test for mergers.

AstraZeneca may still be a UK-based enterprise. But in the interim a number of UK firms, including Channel 5, sold off to US Viacom, and Birmingham software concern Delcam, passed quietly into American hands. It could not happen in the other direction.

Bad ol’ boys

BP’s decision to take the fight against unjustified compensation payments by the Louisiana courts over the Deepwater Horizon oil spill to the Supreme Court reflects a deep sense of frustration at the company. BP believes it is being skewered by a nexus of interests that includes politicians, the Louisiana courts and good ol’ boys.

BP acknowledges, however, that getting the case on the Supreme Court’s roster is a bit of a lottery.

Louisiana may be winning in the short term, as some $2bn has so far been paid out to business claimants, but the state could shoot itself in the foot in the long-term.

BP still regards the Gulf of Mexico as one of the most fecund oil drilling geographies and many of the services, production and refining, and other enterprises that previously were focused on Louisiana, are being diverted to more friendly climes in Texas and Mississippi.